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Mann v Hulme
[PDF]

Citation:

106 CLR 136

Court:

High Court of Australia (AUS)

Judges:

Dixon, Fullagar, Taylor, Menzies, Windeyer

Judgment Date:

2/8/1961

, 35 ALJR 153, [1962] ALR 75, [1961] HCA 45

Digest | Top
Professions and trades > Lawyers > Duties and liabilities > Solicitor and client > Liability of partners
Misappropriation of trust funds - Money received by partner for investment - Misapplication by partner - Liability of firm - Measure of liability
R, a partner in a firm of solicitors, informed H and his wife, who were clients of the firm, that the firm had many avenues for investing money
with various clients at substantial rates of interest. Later H and his wife visited the firm's office and according to Mrs H, R informed them that
the firm had clients engaged in the building trade who wanted to borrow money from time to time on second mortgage, and he offered to invest
their money in this way, and assured them that their capital would be secure. He said that he would give his own promissory notes as an added
security for their investments. R informed H and his wife from time to time that he had builder clients who needed specified sums of money, and
they forwarded the sums to him. R prepared and delivered to H and his wife his personal promissory notes. During the period covered by the
transaction various payments of interest were made to H and his wife. R misapplied the money. H and his wife claimed that the firm was liable
for the amounts misapplied, together with interest. Held:
(1)

The purpose of giving the promissory notes was to constitute R a surety in respect of each investment undertaken, and in no way
changed the character of the proposed transaction, which according to the evidence was the entrusting of funds to R as a partner in the
firm for specific investments on behalf of H and Mrs H, and was within the ordinary course of business of a solicitor.

(2)

The proper conclusion on the evidence was that the money was handed to R to be invested by him on behalf of H and Mrs H on second
mortgages, but even if no mention was made of second mortgages the money was placed in R's hands for the purpose of making
specific investments from time to time upon securities prepared by him, and such a finding would be sufficient to bring the case within
the Partnership Act 1892 NSW, s 11 .

(3)

The measure of the firm's liability under the Partnership Act, s 11 , was the money which had been misapplied. The plaintiffs were not
bound to endeavour to trace the money and then, in order to ascertain whether or not they had suffered a loss, to accept and give credit
for any investment which might be found to have been made by the misapplication of the money in question, though, on the analogy of
the liability of trustees for breach of trust, they might have followed that course had they so wished.

Partnership > Rights and duties - partners and third parties > Generally
Misapplication of money received by one partner - Scope of authority - Measure of liability of firm - Money received for investment by partner in
firm of solicitors
R, a partner in a firm of solicitors, informed H and his wife, who were clients of the firm, that the firm had many avenues for investing money
advantageously. R later informed them that the firm had clients in the building trade who wanted to borrow money on second mortgage: he
offered to invest their money in this way and assured them that their capital would be secure. He offered his own promissory notes as an added
security. R informed H and his wife from time to time that he had other builder clients who needed specified sums of money, and they forwarded
the sums to him. R prepared and delivered to H and his wife his personal promissory notes. During the transaction payments of interest were
made for H and his wife. R misapplied the money. H and his wife claimed that the firm was liable for the amounts misapplied, together with
interest. Held:
(1)

The purpose of giving the promissory notes was to constitute R a surety in respect of each investment undertaken, and did not change
the character of the proposed transaction, which according to the evidence was the entrusting of funds to R as a partner in the firm for
specific investments and was within the ordinary course of business of a solicitor.

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(2)

The proper conclusion was that the money was handed to R to be invested by him on behalf of H and Mrs H on second mortgages, but
even if no mention was made of second mortgages the money was placed in R's hands for specific investments from time to time on
securities prepared by him, and such a finding would be sufficient to bring the case within s 11 of the Partnership Act 1892 NSW .

(3)

The measure of the firm's liability under s 11 of the Partnership Act was the money which had been misapplied. The plaintiffs were not
bound to endeavour to trace the money and then, in order to ascertain whether or not they had suffered a loss, to accept and give credit
for any investment which might be found to have been made by the misapplication of the money, though, on the analogy of the liability
of trustees for breach of trust, they might have followed that course had they so wished.

Litigation History | Top

Earlier Proceedings of [Mann v Hulme, 106 CLR 136]
Affirmed - Hulme v Mann (1960) 61 SR (NSW) 136, 78 WN (NSW) 90, [1961] NSWR 68

Cases Citing | Sort by Court | Sort by Year | Top

Followed by | Top
- Law Institute (Vic) v Cowan Investment Survey Pty Ltd [1973] VR 293

Distinguished by | Top
- Solicitors' Liability Committee v Gray (1997) 77 FCR 1[PDF], 147 ALR 154

Legislation Judicially Considered | Top

Partnership Act 1892, s 11 NSW

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